Just How Much Mortgage Can I Afford? [mortgageloan-processor.blogspot.com]
Setting CMHC amortization rule at 25 years will amount to same as 1-per-cent hike in interest rate. Tightened lending for mortgages will cool market รข€" but by how much?
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mortgageloan-processor.blogspot.com Mortgage Choice - How much can you afford?
The typical rule-of-thumb to answer this question is "one week's gross income". But because of the tax advantages of home ownership, its really higher than that. 31% of your annual gross income is a workable rule-of-thumb. So, if you have a household income of $ 100,000, then you can afford up to approximately $ 31,000 per year in monthly payments. Divided by 12 months per year, this is $ 2,583 per month.
The secret though, what the money merchants at the banks and mortgage companies don't want you to know, is that $ 2,583 per month must cover more than merely the repayment of the loan. This payment must cover
(1) the repayment of the principle amount of the loan,
(2) the interest on the loan,
(3) the real estate (i.e., ad valorem) taxes,
(4) the homeowner's insurance,
(5) any homeowner's association fees (if you live in a development with common elements, and
(6) any escrow amounts the lender requires.
So let's look at this.
Assume your real estate taxes are (or would be) $ 250 per month and your homeowner's insurance is the same. That's $ 500 per month. Now assume you live in a development with common elements, with a payment of $ 100 per month. Now the total is $ 600 per month. We'll assume there are no more escrow funds to set aside.The monthly total is $ 600 per month. You can afford $ 2,583 per month. $ 2,583 less $ 600 is $ 1,983 per month. Assuming a 4.5% mortgage, payable monthly over 30 years, then you can afford to borrow approximately $ 391,000. Remember, this is a fixed-rate mortgage. The interest rate does not vary over the life of the loan.
Another work of caution. Just because you can afford to borrow $ 391,000 does not mean you should borrow $ 391,000.
You probably also have some credit card debt, maybe a student loan (or two!) and every month brings emergencies you did not foresee. You also have your retirement goals to fund and maybe college educations to think about. It is, therefore, OK to borrow less than you can afford to pay back. Find More Just How Much Mortgage Can I Afford? TopicsQuestion by PrimeConcern: How much mortgage debt is there in the USA? Given all the worries about credit in this country, and subprime mortgages, I was curious as to what the entire amount of home mortgage debt is. There are about 110 million households in the country, with 70% of them owned residences. Let's say there are 75 million owned homes. Not all have mortgages, but if 70 million do, and the average mortgage amount on such homes is $ 200,000, that comes out to a scary $ 14 TRILLION of mortgage debt in the USA. If just 2% default, the amount of bad home loans is $ 280 billion. It could obviously be much higher. Does anyone know what total mortgage debt is per household and in total? This is a real problem that could damage the economy. Best answer for How much mortgage debt is there in the USA?:
Answer by Pete W
You bring up an important question. The best data I can find on the 'net are figures for 2003 (USA Today) - nothing newer available according to them. If that number is correct then the total mortgage debt in the US, 2003, $ 6.3 trillion. Some adjustments must be made for the past four years- higher, I'm sure. Lots of bucks out there!!
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